Welcome to the MKS Instruments third quarter earnings conference call, on the 22nd of October 2009. We’re out to play recorded presentation. All participants will be in a listen-only mode. After the presentation there will be an opportunity to ask questions. (Operator Instructions). I will now hand the conference over to Mr. Ron Weigner. Please go ahead, sir.

Good morning, everyone. I am Ron Weigner, Chief Financial Officer, and I am joined this morning by Leo Berlinghieri, Chief Executive Officer and President. Thank you for joining our earnings conference call. Earlier this morning, we released our financial results for the third quarter of 2009. You can access this release at our website www.MKS Instruments.com. As a reminder, various remarks that we may make about the future expectations, plans and prospects for MKS constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors including those discussed in today's press release and in the company's most recent annual report on Form 10-K and most recent quarterly report on Form 10-Q, which are on file with the SEC. In addition these forward-looking statements represent the company's expectations only as of today. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statement should not be relied upon as representing the company's estimates or views as of any day subsequent to today. Now, I'll turn the call over to Leo.

Thanks Ron. Good morning everyone and thank you for joining us on the call today. I'll give an overview of the third quarter and our outlook for the rest of the year. Following me, Ron will review financial results and guidance, and then we’ll open the call for your questions. Since late in the second quarter, we’ve been seeing improvement in our business. Third quarter sales increased approximately 34% sequentially to $106.3 million and were inline with our increased guidance. We returned to profitability on a non-GAAP basis in the third quarter and our non-GAAP earnings were $0.03 per share. Our GAAP net loss for the quarter was $0.08 per share, which includes the effect of the lower effective income tax benefit for 2009. Ron will cover these in more detail later in the call. The increase in our revenue primarily reflects the higher levels of sales at our semiconductor OEM and device customers and is consistent with recent announcements by industry research firms that chip unit sales and semiconductor front end equipment utilization rates are increasing. Our third quarter sales to semiconductor OEMs and device makers increased sequentially by 72% to $57.6 million. This is a significant increase, its due not only to our customers increased sales, but is also result of them adjusting the inventory pipeline for their current build rates. Our ability to meet this significant sequential increase demonstrates that MKS is well positioned to meet these higher business levels. As, you know, MKS is a key technology supplier and our products are integral components in subsystems of many leading OEM tools. However, our customers depend on us not just for our technology, but also for our capability as a supplier. One of the longstanding strengths of MKS is our ability to increase production to meet the…

Thank you, Leo. In the third quarter, we achieved better performance than our original guidance for sales, operating results, and cash flow. Third quarter revenue increased 34% sequentially to $106.3 million. We achieved profitability with non-GAAP earnings of $0.03 per share. The company's GAAP net loss for the third quarter was $0.08 per share, which includes the effect of a lower effective income tax benefit for 2009. Our breakeven for the third quarter was lower than projected at approximately $101 million. The lower breakeven was the result of lower than expected operating expenses, primarily caused by reduced fringe benefit costs, as well as the timing of certain project related expenses. Our cash position remained strong as we continue to focus on improving accounts receivable, day sales outstanding, lowering inventory, reducing capital spending, and controlling cost. Cash and short-term investments net of debt increased $5.6 million to $254.7 million. Day sales outstanding improved to 64 and inventory in turns improved to 2.2 turns. Capital expenditures for the quarter were $750,000 and depreciation expense was $3.6 million. In the third quarter, we saw sequentially increasing orders each month, primarily driven by increased requirements from semiconductor OEMs and semiconductor fabs. In the third quarter sales to semiconductor OEMs increased 86%, sales to fabs increased 42%, and our sales to other markets, which includes solar increased 6%. Our solar business increased in the third quarter to $7 million from $4.4 million in the second quarter and totaled $18.3 million for the nine-months of 2009, compared to $35.5 million for the first nine-months of 2008. We believe solar will be a growing global opportunity for us in the years ahead. Our service business increased 17% reflecting that semi fabs are increasing utilization. In the third quarter sales of semiconductor OEMs represented 40% of sales, sales…

(Operator Instructions). The first question comes from Krish Sankar from Banc of America. Please go ahead, sir.

One, in terms of the dynamics you’re seeing going forward beyond 4Q, can you just elaborate if you still see semiconductors being the big driver or do you see flat panel, other segments come back too?

Well Krish, since semiconductor is still a big piece of the total business, that would have the biggest impact, but we would expect also that flat panel displays seem to be stronger, LEDs seem to be strong right now. Depending on how solar goes, it may recover a bit from where it was since it's been down about 50% compared to last year. I think semiconductor would likely be as it was in the past quarter or two, the main drivers, but the other pieces of the business, it’s a smaller percentage but if we saw the same kind of growth it certainly would influence it.

The step-up in OpEx from Q3 to Q4, does it include all the temporary costs or how did you model it going forward, are there temporary costs that’s going to start coming in through 2010?

As I said the step-up in the fourth quarter represents the majority of curtailing the temporary costs. And as I mentioned to you, we have said on previous calls that that after restoring all our temporary reductions and so forth our breakeven could range around in the $114 million range. Looking into next year, we expect that, we would keep operating expenses relatively steady, ranging in that $42 million to $44 million range with a breakeven maybe in the $114 million to $118 million range. And looking to next year’s possibility that we make some future investment in R&D or some other projects, so that's just a general idea of what we look at going forward.

On the LED said, the main product you guys sell to the LED equipment basis mostly on flow controller side, can you actually quantify what would be a third available market for MKS?

Certainly there are a large number of flow controllers on the LED tools. But in addition to that most of the vacuum products that we sell, the process manometers we sell our Baratron throttle closed-loop pressure control, the throttle valves, the vacuum lines out of the HPS group and heaters, primarily around the vacuum products. But it's more than just the flow controllers.

The next question comes from CJ Muse from Barclays Capital.

In terms of the December guide, should we assume similar type of percentage mix coming from the OEM chipmaker side or will that grow as a percentage?

I think we're projecting similar mix.

Our expectation is that it would be similar.

About the health of the supply chain, can you comment on what you're doing in terms of your suppliers and what kind of pressure you are getting from your customers and I guess how that will impact lead times and/or your cost structure?

Yes, I think as you move in different levels of the supply chain certainly where OEMs are big piece of our business, and as we go down the supply chain to our supplier level, a lot of them are more service-related suppliers, not as dependent on semi, but just industry in general. So during the slowdowns, we probably work with them much closer and keep a more favorable relationship maybe then, if you're just dependent on one industry. So, they have worked for us in the past, we work closely with them. We have had numerous updates with them even during the down turns, we stay in close communication. But we actually bring in some inventories during a downturn that maybe we don't absolutely need, but to keep that supply chain healthy. I'm pretty confident that the supply chain will respond. It's been one of our strengths is our supply chain and our manufacturing capability, so I don't expect anything different this time around with the ramp.

I know visibility is better, but still not phenomenal. Can you comment on what your first half 2010 outlook looks like relative to the second half of calendar ’09?

C.J., you probably have better information then I have on what that looks like. The only thing I can comment on is that if certainly the fabs keep buying equipment, the OEMs seem to be fairly optimistic at least in the near future, so we're not expecting anything to change downward at all. So we're expecting that we would see some increased business going into the first half of the year should the economy, there's positive statements and comments maybe not necessarily about the US economy, but certainly the global economy. And if that holds true and then fabs keep spending then we would expect increased business going into the first half of the year. But without short lead times, it's difficult to say much more than that.

Last question for me. On your non-semi business it looks like you're tracking about down 32% year-on-year, so getting to around 190 million, you did 280 million last year. What could we expect in calendar 10? I guess you talked about some of the key levers between LED solar, but I guess is there anyway to frame a growth rate around that.

It's very difficult because of there's so many diverse markets and depends on, where the global economy actually gross. So, certainly right now there's still growth in China. So you're seeing business activity in China. It’s very, very difficult. I'd expect that medical seems to be strong right now, some of our MRI customers seem to be stronger and recovering a little faster, maybe than some other parts of the general market. Flat panel and LED, but to put a number on it, I just wouldn't be able to give you one right now.

Thank you. The next question comes from Jim Covello from Goldman Sachs. Please go ahead, sir.

This is Kate Kotlarsky for Jim Covello. A quick question on the inventory trends that you guys are seeing at your customers. Looks like your sales to your particular you said the OEM customers were up quite a bit relative to what their sales were up during the quarter. I'm just curious whether customers perhaps were getting a little bit nervous that they didn't have enough inventory of your product, and if there is any risk that you think they might have, ordered, a little bit sort of too much relative to what, they were selling during the quarter. And if there is any risk that perhaps things can moderate a little bit in Q4?

Well, we’ve given our guidance for Q4. It certainly is a little bit more moderate than the range a little more moderate than where we came out with in Q3. I don't think there is any unusual buying. I think that one of the comments I made earlier on the call was that does include some inventory pipeline adjustment, but that's natural. I think if you look in a downturn in an equipment company and look at their factory floor, there is almost no tools and whip. And then if you go there, when they are starting to hit better revenue levels, you will see a factory that actually has tools and whip. So, I think most of the inventory that would be built it would more be a reflection of the sizing of the inventory pipeline to the build rates that they're at, and that would include, primarily whip. With our products you’re talking typically two to four weeks on average for the majority of the products. So, they don't inventory a lot of the products. The systems we set up with them we get a call and we deliver or they pull something and we replace it. So, it's very hard to just build raw material inventory. I think most of the sizing would relate to you won't see just a few tools on the factory anymore, you will see a flow going through the factory with tools and whip and that's typically where the inventories build.

Okay, that's helpful. I mean it sounds like you guys have put some additional resources to work to sort of meet, the demand, kind of a step up in demand maybe now that you're seeing from your customers, which you didn't see maybe a month or two ago, is that fair?

That's absolutely fair. In the direct labor and manufacturing and some of the manufacturing support functions logistics and things of that nature, that's absolutely the case.

Thanks. Sir, we have a follow-up question from Krish Sankar.

Is it fair enough to assume that at this point, the linearity of the shipments is pretty close to that of your semi-OEM customers?

Just short lead times should do that. Short-cycle times for them and short lead times for us should keep it closer, but on their end there are so many variations in what they build and what they sell to customers, and we sell so many different end items to these OEMs, it would be impossible to say yes or no to that. I would say that like in a downturn where inventory gets consumed first, in an upturn, inventory pipeline gets built while things are growing. So as they dampen their growth or as the growth moderates, I would expect that the whip levels kind of moderate and stay level. So then things would be matched up.

What is your SPD revenues in Q3?

We don't break that out separately.

We appear to have no further questions at the moment, sir.

Well, thank you for joining us on the call this morning. Given that forecasters are optimistic about the global economy and the recent announcements by leading chip and equipment companies have been positive we are cautiously optimistic about the future. With our broad technology portfolio we continue to see expanded opportunities in diverse markets. We are positioned to take advantage of increased demand from our customers with our short lead times and responsive operations. Thank you.

This concludes the MKS Instruments third quarter earnings conference. Thank you for participating. You may now disconnect.